Building a custom home in Miami asks for careful planning, and financing is one of the first big decisions. If you want one loan that funds your build and then becomes your mortgage, a construction‑to‑permanent loan can simplify the path. You still need to understand how lenders evaluate your project, how draw schedules work, and how Miami’s coastal rules and insurance shape the budget. This guide explains the mechanics, Miami‑specific factors, and a step‑by‑step plan to set you up for a clean execution. Let’s dive in.
Construction‑to‑permanent basics
A construction‑to‑permanent loan, often called single‑close, combines your short‑term construction financing and your long‑term mortgage in one package. During construction you make interest‑only payments on the amount that has been drawn. When the home is complete and passes final inspections, the loan converts to a standard amortizing mortgage without a second closing.
You can also choose a two‑close path, which means a stand‑alone construction loan followed by a separate permanent mortgage. That approach can mean two sets of closing costs and a different rate later, but it can offer more flexibility if you want to shop the permanent rate near completion. Your decision depends on your risk tolerance, schedule, and lender terms.
How lenders underwrite your project
Lenders look at both your project and your personal profile. For construction, they focus on Loan‑to‑Cost, the percentage of total project cost the lender will fund. Typical ranges are 70 to 80 percent for conventional or portfolio loans, with luxury or jumbo projects often capped lower, around 60 to 70 percent, to account for appraisal and market risk.
At conversion, lenders also check Loan‑to‑Value based on a subject‑to‑completion appraisal. Your permanent mortgage must fit within the lender’s LTV limit once the home is finished. Expect higher credit score requirements, often 700 or more for competitive terms, and liquid reserves to cover debt service and contingencies, commonly 6 to 12 months. If the home will be rented or the borrower is a developer, lenders may test debt service coverage for the permanent loan.
Rates during construction are usually variable and tied to a short‑term index with a margin. You pay interest only on funds actually disbursed, not on the full commitment. Some single‑close products let you lock the permanent rate at the start, while others set the rate at conversion. Confirm lock options and any time limits with your lender.
Draws, inspections, and retainage
Construction funds are released in draws based on milestones or monthly progress. Lenders require a detailed line‑item budget with a draw schedule and contingency. Before each draw, an inspector verifies percent complete and checks invoices and lien waivers. Approved reports trigger disbursement.
Most lenders hold a retainage, often 5 to 10 percent, either from each draw or at the end of the contract. Retainage protects against incomplete items, and it is released after the final inspection. Change orders must be documented and approved by the lender. Unapproved changes can delay funding and may need to be covered with additional borrower equity.
Converting to your permanent mortgage
Conversion usually happens when the project receives a Certificate of Occupancy or final sign‑off. You should expect a final appraisal, updated title, lien releases from subs, proof of homeowner insurance, and any other conditions listed in your loan agreement. At that point, the loan switches to an amortizing schedule such as a 15, 20, or 30‑year fixed term. Some single‑close products charge small administrative fees at conversion. Ask about these at the start so you can budget accurately.
Miami rules that shape financing
Building in Miami‑Dade County brings specific code, coastal, and insurance realities that affect underwriting, schedule, and cost. The Florida Building Code and Miami‑Dade’s High‑Velocity Hurricane Zone standards require wind and impact protection. Products like windows and doors often need Miami‑Dade Notice of Acceptance approvals. Lead times for custom impact systems can be long, so early coordination is essential.
Many waterfront or barrier island sites sit in Special Flood Hazard Areas. Federally regulated lenders will require flood insurance, and local elevation rules can dictate raised foundations or open foundations in V‑zones. Sites that need pilings or seawalls add cost and time, and marine work can introduce additional permit layers. Lenders will factor these elements into the budget review and appraisal.
Insurance costs for wind and flood are a key part of underwriting. Some owners secure coverage in the private market, and others rely on Citizens. Lenders underwrite the permanent mortgage using current market insurance assumptions, which can affect your qualifying amount and cash flow. Plan for this early so your budget reflects the true carrying costs.
Permitting timelines vary by scope and municipality. New custom homes or large remodels can take weeks to months to clear plan review. Projects that need variances, coastal approvals, or historic review will take longer. This schedule risk is one reason lenders prefer conservative timelines and robust contingencies in Miami.
Appraisals for ultra‑luxury homes can be challenging because comparable sales are limited. Expect conservative valuations, higher equity requirements, or additional appraisals for estate‑scale or highly unique properties. Many Miami projects also fall into jumbo territory, which means tighter credit standards and larger reserve requirements.
Budgeting and risk controls that work
Set a contingency that fits Miami’s realities. For custom or luxury builds, a 10 to 20 percent contingency is common to manage coastal foundations, impact products, custom finishes, and schedule variability. Document how contingency can be used and whether it is inside the loan or funded by you.
Plan procurement early. Impact fenestration and specialty finishes often carry long lead times, and delays here can ripple through inspections and draws. Secure builder’s risk, general liability, and workers’ compensation before the first draw, and price homeowner wind and flood policies well before conversion.
Align the lender, architect, and GC on documentation and pay flow. Clear draw packages with lien waivers reduce friction. One point of contact to manage inspections and paperwork keeps funds moving and helps you protect the schedule.
Your action plan, step by step
- Start lender conversations early. Share plans, specs, and budgets for a preliminary read and a conditional term sheet.
- Assemble the right team. Choose an architect and GC experienced with Miami‑Dade HVHZ, coastal piling or seawall work, and lender draw processes.
- Build a lender‑ready budget. Include site work, geotech, foundation, MEP, finishes, and a realistic contingency. Tie a draw schedule to milestones.
- Map your permit path. Confirm municipal requirements, any variances, and expected plan review timelines. Sequence long‑lead products to meet inspections.
- Lock in insurance strategy. Price builder’s risk and confirm permanent wind and flood coverage options and limits early.
- Set the construction timeline. Account for hurricane season and inspections. Add buffers where supply lead times are long.
- Define change‑order rules. Agree on documentation and approval steps so changes do not stall draws.
- Prepare for conversion. Track lien releases, final inspections, and insurance so you can switch to the permanent mortgage without delays.
Example timeline and draw structure
Most projects follow a broad timeline. Underwriting and plan review can take 2 to 8 weeks depending on lender and complexity. Permit issuance can range from several weeks to months, especially for coastal or variance‑heavy locations. Custom luxury construction in Miami often runs 9 to 24 months, depending on site work, pilings, MEP scope, and finishes. Allow extra time near the end for final appraisal, title updates, and conversion documents.
Draws commonly align with milestones. A typical structure might be:
- Mobilization and foundation: 15 to 25 percent, excluding retainage.
- Framing, roofing, and weather‑tight: next 20 to 25 percent.
- MEP rough‑ins, insulation, and inspections: next 20 to 25 percent.
- Interiors, exterior finishes, landscaping, and punch: final 20 to 30 percent, less retainage.
- Retainage: 5 to 10 percent released at final completion.
Your lender will want a line‑item budget that supports these milestones and clearly shows contingency.
Questions to ask lenders upfront
- Do you offer single‑close and two‑close options, and can I lock the permanent rate now?
- What are your maximum Loan‑to‑Cost and expected permanent Loan‑to‑Value, especially for jumbo amounts?
- How do inspections and disbursements work, what is the retainage, and how are change orders handled?
- What is the construction term, and what happens if the schedule runs long?
- What reserves do you require, and how do you underwrite wind and flood insurance costs?
When a two‑close path can fit
A two‑close structure can make sense if you want the flexibility to shop the permanent rate closer to completion or if the project scope is likely to change significantly. It can also fit a multi‑phase plan where you complete one structure before starting another. The tradeoff is added closing complexity and potential exposure to market rate shifts.
How Jomed streamlines the process
A strong GC reduces financing friction by planning and documenting well. You benefit from a builder who can produce lender‑ready budgets, align draw milestones with inspections, and manage lien waivers and change orders in real time. In Miami, experience with HVHZ detailing, coastal foundations, and impact product procurement is essential for on‑schedule draws.
With a construction‑manager mindset, transparent monthly reporting, and a proven network of specialty trades, you can keep inspections, disbursements, and on‑site progress aligned. That is the foundation for a clean conversion when you reach final inspection and Certificate of Occupancy.
Ready to discuss your site, budget, and timeline? Request a Project Consultation with Jomed Construction to plan a lender‑ready path for your Miami build.
FAQs
What is a construction‑to‑permanent loan for Miami builds?
- It is one loan that funds construction with interest‑only draws and then converts to an amortizing mortgage at completion, avoiding a second closing.
How do construction draws and inspections work in Miami?
- Lenders release funds in stages after onsite inspections confirm progress, with invoices and lien waivers; a 5 to 10 percent retainage is common until final completion.
How do HVHZ and product approvals affect cost and schedule?
- Miami‑Dade’s HVHZ rules require impact‑rated products, often with Miami‑Dade NOA approvals, which can increase costs and lead times that you should plan for early.
Do I need flood insurance for a coastal Miami home?
- If your site is in a Special Flood Hazard Area, lenders will require flood insurance; elevation rules and foundation design also factor into underwriting.
What reserves and credit do lenders expect on jumbo projects?
- Many lenders look for strong credit, often 700 or higher, and liquid reserves of about 6 to 12 months of payments, with stricter overlays for jumbo amounts.
What triggers conversion to the permanent mortgage?
- Conversion usually follows a Certificate of Occupancy or final sign‑off, along with a final appraisal, clear title with lien releases, and homeowner insurance in place.
